If you fail to file and pay your payroll taxes, also known as employee withholding taxes, you will face numerous problems. Unpaid payroll taxes lead to enormous IRS penalties and interest. Failure to pay payroll taxes can lead to a seizure of your business assets and may require you to shut down. Payroll tax problems can affect your freedom to conduct business.
You need to take some steps as early as possible to resolve payroll problems. The penalties accruing for unpaid payroll taxes can more than double within just a few months. It is crucial to take immediate action when dealing with payroll tax problems. Many businesses use their payroll tax withholdings, also known as employee withholding taxes, to meet other operating expenses. Business owners forget or do not realize that the money collected from the employees share of federal tax, Medicare and FICA does not belong to them but rather is the employee’s pay that must be paid to the government.
The IRS is highly concerned with the collection of unpaid payroll taxes. The withholding portion of payroll taxes is deemed as the Trust Fund portion. As an employer, it is your duty to collect federal withholding taxes from your employees and pay it to the IRS. Failure to pay the Trust Fund portion of the tax will result that portion being assessed to the Responsible Person/s (a “Responsible Person” is anyone that is a decision maker for the company that could affect how the payroll was dispersed. For example business owners, board members, bookkeepers, accountants, attorneys, everyone on the bank signature card, etc.)
Penalties for payroll tax problems, also known as employee withholding tax problems, are much more severe than they are with other tax problems. It is more difficult to negotiate a payroll tax settlement. Long term Installment Agreements are generally not available for owing payroll taxes, because the IRS wants to ensure that the business can pay off the back taxes and continue to pay current payroll taxes. Offers in Compromise are virtually always rejected for unpaid payroll taxes when the company remains in business because they feel that if the business cannot afford their current liability let alone their back payroll taxes.
If you find yourself faced with payroll tax issues pick up the phone or email us at the Tax Resolution Institute. You do not want to waste any more time letting these issues remain unresolved. Time is money…a lot of money in this case.
About Peter Y. Stephan
Peter Y. Stephan, executive director of the Tax Resolution Institute, has been helping people resolve large, complex payroll tax problems and personal income tax problems for over 25 years. Peter has written a book "The Ultimate Tax Resolution Guide" and speaks on Tax Resolution topics frequently.